What Is Franchising?
Franchising is a method of distributing goods or services to consumers. The franchise system owns the right to the trademark of the franchise business. The franchisee purchases the right to use the trademark and operating system.
Most people associate the word “Franchise” with fast food restaurants. But, there are many more types of franchise businesses, including everything from advertising to automobile repair, printing services to party supplies and many more.
- Product Distribution Franchise
- Business Format Franchise
- Single Unit Franchise
- Multi Units
- Master Franchise
- Area Developer
History Of Franchising
When the Baby Boom generation began entering the workforce the demand for jobs increased drastically. The large workforce demanded the opportunity to explore and develop more and better business opportunities, which changed the business and our economy forever. With these demands, franchising evolved into a dominant and very successful concept â€“ Business Format Franchising. In this type of franchising, the ‘franchisor’ (example: McDonald’s) not only allows the franchise to use its name and sell its products or services, but also transfers an entire way of doing business. This includes marketing, operating, technical training, management technique and expertise developed and perfected by the franchisor (sometimes referred to as a “learning curve”). The franchisor also provides on-going training and support through the life of the franchise agreement.
The Future Of Franchising
Within the next 10 years, franchising will comprise over 50% of the retail economy and employ millions of people. This growth is anticipated based on the simple logic of the underlying concept. Franchising offers low-risk success to aspiring new business owners. These systems will enable hundreds of thousands of new business owners to realize the dream of successful business ownership and financial independence. Like the US and world economies, franchising is evolving. There will be even greater opportunities for wealth creation among both franchisees and the franchisor as this evolution progresses. New franchises will develop while the existing systems will become more fortified and continue to grow.
When you are ready to go into business for yourself or if you want to optimize an existing business, then you should look closely at franchising as the vehicle to take you where you want to be in the 21st century.
Recognizable Franchise Names
Categories of Franchises
- Franchise businesses account for 50% of all retail sales in the United States.
- Franchise businesses employ more than 10 million Americans
- There are an estimated 1500 franchise companies operating in the U.S. doing business through more than 316,000 retail outlets.
- Seventy-Five (75) industries use franchising to distribute goods and services to consumers.
- A 1999 study by the United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business.
- A U.S. department of commerce study conducted from 1971 to 1997 showed that during that time less than 5% of franchise businesses were closed each year.
- Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non-franchised businesses closed within 6 years of their existence due to failure, bankruptcy, etc.
- Total sales by franchised businesses are projected to reach $1 trillion, this year.
- 1 out of every 12 businesses is a franchised business.
- A new franchised business is opened every 8 minutes of every business day.
- Before taxes in 2000, the median gross annual income of franchisees was in the $75,000 to $124,000 range with over 30% of franchisees earning over $150,000 per year.
Advantages To Buy A Franchise
- The Marketplace has already been checked out by the franchisor and determined the system to be successful.
- The franchisor utilizes collective buying power and passes the discounts on to you.
- Local and national advertising for the franchise operation as a whole is supplied by the franchisor.
- Supervision, training programs and consulting are readily available from the franchisor.
- Managerial, operational and accounting systems are in place to facilitate your success.
- Franchisors insist that you are adequately capitalized.
- Ongoing research and advertisement is provided by the franchisor.
- Location! Location! Location!
- Franchises have vested an interest in your success.
- Franchises have a 97% success rate. Most people can’t even predict that they can keep their jobs with a 97% certainty.
In a Franchise you are a business for yourself, not by yourself.
Disadvantages to buying a franchise
- You have to pay the franchisor royalties even when not making profit.
- The contract with the franchisor must be renewed after a certain period of time.
- There is a lack of flexibility because business methods are dictated by the franchisor.
- The franchisor’s problems are also your problems.
- You may be forced to buy products by the franchisor rather than the most cost effective product available.
- You don’t get to make all of the decisions in how to run your business.
- In some ways, owning a franchise is like a cross between business ownership and employment.
Questions To Ask Yourself
- How much capital do you have to invest?
- How many liquid assets do you have?
- Do you require a specific level of annual income?
- Are you interested in pursuing a particular field?
- Are you interested in retail sales or performing service?
- Do you want a part-time or full-time opportunity?
- How many hours are you willing to work?
- Do you want to operate the business yourself or hire a manager?
- Do you want to have employees?
- Do you want to have inventories?
- Do you want to have Accounts Receivables?
- Will franchise ownership be your primary source of income or will it supplement your current income?
- Would you be happy operating the business for the next 20 years?
- Would you like to own several outlets or only one?
Is Franchising Right For You?
- Can you follow somebody else’s rules, even when you think you have a better way?
- Do you think you can change the franchisor’s system after you are on board?
- Do you think that your local market is different from all others in the system and that the franchisor will modify the system just to suit your needs?
- Can you trust (with some honest skepticism) that your franchisor is working for the benefit of the entire system – even when his or her decisions do not necessarily go your way?
- Are you willing to share financial information and provide required reports each month? Are you prepared to accept coaching and advice on business practices from your franchisor’s field staff?
Some Franchise Businesses can be run without expansive infrastructure. Kiosk based food options, such as drink specialties, are fairly low-cost.
Home Cleaning Services are on the rise. Dry-cleaning (pick up and delivery) and in home decorating services function with only a driver and a van.
Home based franchise concepts are a relatively inexpensive way to get a business started with a decent chance of success.
- Finance focused Lenders
Knowledge of Franchisor
Primary Lending Business
- 401K Conversions
No Tax Implications
- Franchisor (Fewer)
- Angle Groups
A cross between a traditional entrepreneur and a modern franchise owner. One possessing the desire to be a business owner without the desire to recreate the wheel. The ability to follow a proven system for the benefit of personal and professional goals.
- Be in business for yourself, but not by yourself.
- Learn from the success and failure of others.
- Franchising is a process of bottling success and giving it to other people for use in developing their own successful business.
- Why would you spend the money and time required to establish a successful brand when you could buy a franchise which would give you immediate access to a successful business system and a brand name which others already have made successful?
- Why work for someone else when you can work for yourself and reap the reward of your efforts?
Master Franchise Specialists are consultants helping individuals, like yourself, find a franchise business which fits your personal profile and requirements. We provide a broad array of services that include help in turning a company into a franchise, and helping a prospective franchisee learn about the many choices that franchising offers to him or herself. We have consultants located from coast to coast waiting to aid you in your search for the best franchise business fit.
We believe that you should use a Master Franchise Specialists Consultant because it allows you to get a series of choices, and services all in one place. We help you by giving you assorted research and information that will help you investigate different franchise opportunities. We also can help you find other professionals, including franchise attorneys, financial institutions, and business advisors.
If you haven’t already, complete our CONFIDENTIAL REQUEST FOR CONSIDERATION or Contact Us — and we will be in touch for your no obligation and informative call.